Changes to Come if Supreme Court Rules in Madden

Midland Has Appealed to the U.S. Supreme Court
– Lend Academy

Lend Academy interviewed Manatt's Brian Korn, a partner in the firm's Capital Markets practice, for a special Q&A-style article on an important case for marketplace lending that may be heard at the U.S. Supreme Court.

Lend Academy reports that Madden v. Midland Funding could have a major impact on the marketplace lending industry if heard at the U.S. Supreme Court. When asked what it could mean for the industry if the court sides with the Second Circuit, Korn replied:

"If the case is not heard we are at status quo. That does not mean the Supreme Court agrees with the Second Circuit. If anything it will be a statement that the court is too busy or does not find the disagreement compelling enough to intervene. Nothing changes in non-Second Circuit states (NY, CT, VT).

If it is heard and the decision affirms the Second Circuit, it essentially serves as federal validation of the Second Circuit and I believe that will hasten more Madden cases nationally. I believe there would be real change in the way lenders operate in order to change their facts from that of the Madden 'sell and go away' model. Investors will be more circumspect of the entire industry until banks continue to have a greater role in the process. Ironically, this could be a revenue opportunity for WebBank and Cross River Bank, as their needed involvement in loans downstream will allow them to increase their rates. I would expect significant dissenting opinion from the court in that case which sometimes is cited in future cases. If the case is heard and reversed, then Madden goes away - but that does not mean regulators cannot impose additional restrictions."

Read the article here



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